Eurozone government debt reached a record level in 2010

• Standard & Poor"s may cut the ratings of five European countries

Government debt in the Eurozone has reached a record level last year, fueling the crisis in the region.

In 2010, the 16 countries which shared the Euro had an average debt which amounted to 85.4% of the GDP, compared to 79.8% in 2009, according to the announcement made on Friday by the EU Statistics Office (Eurostat). In April, Eurostat estimated that the government debt of the Eurozone government debt reached 85.1% in 2010.

Countries with the highest government debt are Greece - 144.9% of the GDP, and Italy - with 118.4% of the GDP.

On the other hand, the overall deficit of the Eurozone fell to 6.2% of the GDP in 2010, from 6.4% in the previous year. The highest deficits in the zone were seen in Ireland (31.3% of the GDP) and Greece (10.6% of the GDP).

At the end of last week, financial ratings firm Standard & Poor"s (S&P) warned that budget deficits and the expenses intended to recapitalize banks could generate a significant of the governments" borrowing costs, in an environment with a low economic growth or with recession. S&P warned that under these circumstances, it could cut the credit ratings of five European countries, including France, by one or two notches,.

In a report which has reviewed the capacity of the European Union and of the International Monetary Fund to support the Eurozone in the event of two scenarios - a double recession and a recession accompanied by a major raise in the interest rates -, S&P said: "In both cases, the sovereign ratings of France, Spain, Italy, Ireland and Portugal will probably be lowered by one or two notches".

Also, according to the most pessimistic scenario drawn up by S&P, the recapitalization of numerous banks in Spain, Italy and Portugal would be needed. The ratings firm stressed that the current aid mechanisms may prove insufficient, if things worsen more than expected.

"France would likely be downgraded to AA+ from AAA because of a deteriorating fiscal position, even if the amount of stress applied remains modest", S&P analysts claim, anticipating an increase in the borrowing needs of the states which are targeted for a downgrade, mostly because of the constantly rising budget deficits, coupled with the worsening of the economic conditions.